Begin by obtaining a copy of your Experience Rating Worksheet. This document contains the payrolls, claims, and other factors that make up the experience modification. You should have received a copy of the worksheet in the mail, but if you did not, it is available from your insurance agent, your insurer, or your state rating bureau, or by ordering a copy from the National Council on Compensation Insurance in Boca Raton, Florida.

With that worksheet in hand, along with an up-to-date loss run, make certain that all the claims that have been charged to the experience modification under the column labeled "Act Inc Losses" belong to your business. 

We have seen businesses charged for claims that belong to someone else, so it is a good idea to confirm that your experience modification contains only your company's claims. 

Be aware of your loss valuation date, and make certain that every possible claim is closed before that date. Generally, that is six months before the experience modification becomes effective. Otherwise, your experience modification might include an open claim reserve that was settled. Remember, you can request the insurer's claims adjuster to close claims before the loss valuation date.

Confirm that the insurer has correctly determined and deducted "Loss Adjustment Expenses" from Incurred Losses. These are the insurer's expenses and should not be charged to you. 

Finally, check the payrolls in the column labeled "Payroll" and confirm that the amounts used correspond with the underlying audits.

Take advantage of the Construction Classification Premium Adjustment Program.  Known by the acronym CCPAP, this is a potentially large, but often overlooked, credit that is available to contractors that pay wages greater than their state's average wage. Because a workers' compensation premium is, at its simplest, a rate times payroll, the higher the payroll, the higher the premium.

The CCPAP is available in 15 states: Alaska, Connecticut, Florida, Hawaii, Illinois, Maryland, Massachusetts, Missouri, Montana, Nebraska, New York, New Mexico, Oklahoma, Oregon, and Virginia. All 15 states require the policy to contain at least one construction-related classification code; some have other requirements. Three states require that the experience modifier be no greater than 1.0. (See Figure 1, below.)

The CCPAP lowers the premium resulting from above-average pay. Unfortunately, in-depth details of the credit are not widely known among contractors, nor even among insurance professionals. Depending on the state, the credit begins with an average hourly wage of about $20 to $25.

If you have payroll in one of the 15 participating states, then your policy should include NCCI Form NC-5000A. That form asks for gross payroll for the third calendar quarter of the year that precedes the policy's effective date. In most states, if you are a new business with no payroll in the previous year's third quarter, you can use payroll and hours worked from the first complete quarter after the policy's effective date.

NC-5000A has three columns: In the first you provide a class code or description of the work (roofing, carpentry, clerical, etc.); in the next you provide gross wages (after adjustments) for each classification of work; and in the third column you provide the corresponding number of hours worked.

Next, mail the completed form to either the state workers' compensation rating bureau or the National Council on Compensation Insurance. They will calculate the credit and forward it to your insurer. The insurer will endorse your policy with the credit and carry it over to the final audit. In most states, the credit ranges from 5 percent to 25 percent of the premium, depending on companywide average wage. If you have operations in more than one state that has adopted the CCPAP, you will need to complete a separate application for each state. When the policy is audited after it expires, the insurer has the right to verify the payroll and hours shown on NC-5000A.

This credit is a useful tool for high-wage contractors to save a large portion of their premium. It is also a great way to gain an advantage over the competition. It is available for a reason, and you should take advantage of it.

Get the most from classifications.  Premium auditors are not permitted to add new classifications. While this is contrary to procedures followed by several insurance carriers, provisions within the policy and elsewhere require that, if a class code is to be changed, it must be done by the underwriter and not the auditor.

Also, contractors may allocate the payrolls of construction employees to different classifications of work, provided that the contractor keeps contemporaneous records that support the payroll allocation. You should preemptively discuss how to set up the payroll records with the insurer's audit department so that wages are assigned to all the eligible classifications. 

Another premium-saving suggestion: Prepare a pre-audit before the annual audit. When the insurer completes its annual premium audit, it works from the records that you provide. Help make the auditor's job easier and more accurate by completing your own audit. Make certain that the prepared payrolls take into account all the credits, limitations, and deductions available. Many auditors will accept your prepared work as their own.

When the audit is complete, request a copy of the auditor's worksheets, review the worksheets with him or her, and discuss how employees were classified. Then, when the final invoice arrives, be sure to compare it with those worksheets.